SUNY Poly lab sold at cut rate for 'political' reasons, buyer says

Inside SUNY Poly's Canandaigua research and manufacturing facility for

The high-tech firm that bought a SUNY Polytechnic Institute manufacturing facility in the Finger Lakes says in a new regulatory filing that the state was motivated to sell at a steep discount for political reasons.

The buyer, Akoustis Technologies, purchased SUNY Poly's Smart System Technology & Commercialization Center in Canandaigua for $2.85 million, roughly $5 million less than the appraised value of the 120,000-square-foot facility, which sits on more than 50 acres of land.

In a filing made last week with the U.S. Securities and Exchange Commission, Akoustis officials outlined why they were able to get the property at such a steal.

"The transaction was completed with a motivated seller who the company believed was very hesitant to liquidate assets and lay off employees in the current political environment," Akoustis wrote.

Sale negotiations came at a time when state and SUNY Poly officials were trying to stabilize the finances of the school and its various economic development projects across upstate following the arrest of SUNY Poly founder Alain Kaloyeros on federal bid rigging charges.

Officials with Empire State Development, the state agency that took control of SUNY Poly's real estate a year ago, argued that the sale of the facility even on the cheap was the best possible outcome since Akoustis, which makes radio frequency filters used in cell phones, was promising to retain all 30 employees and potentially invest $20 million in the facility over time.

At the time, officials with Empire State Development and Fuller Road Management Corp., the SUNY Poly entity that owned the STC, refused to reveal whether the manufacturing lab was losing money, and whether that played a role in the sale.

"That's not how it was set up," Robert Megna, president of Fuller Road Management, told the Times Union back in March. "If you look at that facility, it was set up to get grants. It probably was not losing money. But moving forward, the state won't be putting grant money into the facility — it won't be taking grant money."

In 2002, the state turned the former Xerox building into a state-run facility for companies and scientists to prototype and manufacture microelectromechanical devices, also known as MEMs, that are used in electronics. More than $100 million was spent initially to establish the research and development factory, including $40 million in federal money.

SUNY Poly took over the facility in 2010 just as it was bringing its research and development model to other parts of upstate.

As it turns out, the STC lost $5.13 million during the two-year period preceding its sale, according to financial statements from the deal filed by Akoustis with the SEC on Sept. 12.

The financial statements showed that Akoustis valued the land, building and equipment it acquired in the deal at $6.3 million.

That wasn't the only sweetener in the deal.

Akoustis stands to earn up to $8 million in state tax breaks if it reaches certain investment and employment levels in Canandaigua, and the company has lined up a $400,000 loan from Ontario County.

"The cash burn of the facility was an economic burden to the sellers," Akoustis wrote in its Sept. 20 filing with the SEC. "The company, the county and state were motivated to approve the transaction without significant price negotiation, as they believed it would insure the employment of the headcount and provide the opportunity for increased headcount and increased investment in the facility that would add to the tax base."

Larry Rulison has been a reporter for the Albany Times Union since 2005.

His decades-long career in journalism began in 1994 when he was hired as the editor for a small-town upstate New York weekly known as the Canastota Bee-Journal. He later worked at the Fayetteville Eagle Bulletin, the Baldwinsville Messenger and the Adirondack Daily Enterprise in Saranac Lake. He has covered business since 1998, working for Mutual Fund Market News in Boston and later the Baltimore Business Journal and Philadelphia Business Journal.

Larry's reporting for the Times Union has won several awards for business and investigative journalism from the New York State Associated Press Association and the New York News Publishers Association.